UK manufacturing faces pressure in 2016
The UK manufacturing sector remained under pressure in the fourth quarter of 2015 Getty

Britain's industrial production fell by more than expected between the third and fourth quarter 2015 as the manufacturing sector continued to drag down the country's economy, figures released by the Office for National Statistics (ONS) on Wednesday (10 February) show.

During October to December (Q4 2015), total production output fell 0.5% compared with the previous quarter. This was 0.3% more than the 0.2% slide forecast in the ONS's Q4 gross domestic product (GDP) estimate released earlier this year.

Industrial production declined 1.1% month-on-month in December, compared to the ONS's expected 0.1% decline. It was pulled down by a 4% decline in mining & quarrying sector. November's decline was also revised down to show a 0.8% drop.

Figures revised down

Meanwhile, manufacturing output in December also fell short of ONS's forecast, declining 0.2% month-on-month compared with analysts' expectations for a 0.1% gain. November's figure was revised upwards to show a 0.3% decline.

ONS Index of Production results 2015

  • Total production fell 0.5% between Q3 and Q4.
  • ONS forecasted a 0.2% fall.
  • Total production output fell by 0.4% year-on-year in December.
  • Manufacturing output fell 1.7% year-on-year in December – 0.2% more than November.
  • Mining & quarrying sector production fell 2.3% between Q3 and Q4.
  • Wood and paper products manufacturing & printing fell 2.1% between Q3 and Q4.
  • Q4 2015 production was 9.8% and manufacturing was 6.5% below levels in Q1 2008.

Source: Office for National Statistics

On a year-on-year basis, industrial production fell 0.4% in December, compared to a forecast 1% gain, while November's gain was trimmed down to 0.7%.

The manufacturing sector fared even worse, as output dropped 1.7% from the corresponding period in 2014, falling below forecast for a 1.4% decline and extending the previous month's 1.2% slide.

The ONS added total production for the whole of 2015 was 1% higher than in the previous year, although manufacturing output fell 0.2%, making it the only main sector to decline during the last 12 months.

Future is gloomy

However, in the fourth quarter of 2015, production and manufacturing were, respectively, 9.8% and 6.5% below figures in the pre-crisis GDP peak of Q1 2008.

Analysts were unanimous in describing 2015 as a poor year for the manufacturing sector and warned the outlook was negative.

"With the sector still dealing with the appreciation of the pound from mid-2013 to mid-2015 and overseas demand still subdued, the near-term prospects don't appear much better," said Scott Bowman, UK economist at Capital Economics. "Accordingly, the economy will continue to rely on the services sector to drive the recovery."

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